The Child Tax Credit and Family Well-Being: An Overview of Reforms and Impacts
The Child Tax Credit (CTC) has become an increasingly important element of the U.S. safety net. We discuss the structure of the CTC and its effects on childhood poverty and other indicators of well-being during its three distinct phases: prior to the 2021 American Rescue Plan (ARP) expansion, during the expansion, and after the expansion’s expiration. We also examine recent efforts to establish state-level CTCs. We show that, in 2020, roughly one in three children were ineligible for the full CTC because it is tied to family earnings. The temporary expansion under the ARP extended full CTC eligibility to nearly all of these children, thus moving more than three million children out of poverty in the expansion months. State-level analyses show how states could establish CTCs that reduce child poverty rates by half, either as a complement to an expanded federal CTC or in the absence of a continued federal expansion.
Key Findings:
Prior to the pandemic, 1 in 3 children – including 1 out of every 2 Black and Latino children – was left out of the full federal Child Tax Credit because their families did not earn enough to qualify.
While in place, the 2021 Child Tax Credit closed these gaps and moved more than 3 million children out of poverty, while also reducing hunger, helping families cover essential bills (e.g. food, housing, child care, and education), increasing savings, and reducing debt and stress.
Pairing an expanded federal Child Tax Credit with complementary state-level credits can reduce child poverty in all states by at least 50 percent. States can act now to establish or enhance credits even without federal action.
With simple reforms to the federal and state Child Tax Credits, policymakers can dramatically reduce child poverty and improve child and family well-being.
